China poised to impose limits on overseas software

The draft policy details issued this month imply that government procurement departments will need to make a distinction between "domestic", "non-domestic" and "preferred non-domestic" software, said the FT. For software vendors to be defined as domestic they must prove that at least 50 per cent of its development cost was spent in China, while for software services at least 70 percent of the costs must be based in China, said the FT.

Chinese government departments will need to apply for special approval to buy "non-domestic" software, which will include international companies that have passed targets relating to the scale of their Chinese investment, workforces, research and tax payments, according to the FT.

China has already made moves towards restricting the purchase of overseas software. In August last year Gao Zhigang, an official with the Procurement Centre of the State Council, said that only hardware pre-installed with domestic operating systems and application software will be purchased by the Chinese government in the future, to support the local software industry and protect state information security.